$35B Capital One-Discover merger set to close Sunday

SUMMARY:

McLean-based Capital One Financial is scheduled to close on its $35.3 billion acquisition of Discover Financial Services on Sunday, finalizing the merger of the credit card giants announced last year.

On April 18, Capital One received approval from the Federal Reserve and the Office of the Comptroller of the Currency to purchase Illinois-based Discover. The deal was announced in February 2024, and in December, shareholders at both companies approved it.

"This is an exciting moment for Capital One and Discover. We understand the critical importance of a strong and competitive banking system to our customers and our economy, and we appreciate the thoughtful and diligent engagement of our regulators as they thoroughly reviewed this deal over the past 14 months," Richard Fairbank, founder, chairman and CEO of Capital One, said in a statement in April.

"I am grateful to the thousands of associates across Capital One and Discover who have worked tirelessly to help us achieve this significant milestone," he added. "We look forward to bringing these two great companies together with a profound sense of possibility and responsibility to deliver for our customers, associates, shareholders and communities."

The all-stock acquisition, Capital One's largest ever purchase, was under regulatory scrutiny. Two Capital One cardholders filed a federal class action lawsuit against Discover and Capital One in July 2024, claiming the megadeal would violate antitrust law, but the case was paused in October 2024, pending further action by the U.S. District Court for the Eastern District of Virginia.

In July 2024, Capital One committed to spend $265 billion over five years to lending, philanthropy and investment if the deal goes through.

Earlier this week, U.S. Sen. Elizabeth Warren, D-Massachusetts, wrote to the Department of Justice, calling on its antitrust division to block the transaction.

"Visa and Mastercard, which have enjoyed a duopoly, have a long history of alleged coordination, resulting in higher fees for customers and merchants," Warren wrote. "Capital One has stated that it will move some, but not all, of its credit card volume to the Discover network, meaning it will be negotiating its interchange fees as a credit card issuer with Visa and Mastercard, while separately setting interchange fees on its own network. That is a recipe for coordination among the three networks."

Gail Slater, the DOJ's antitrust czar, determined that she didn't have enough evidence to challenge the deal in court, according to media reports in April.

On Friday afternoon, Capital One's stock price was at $198.67, up 0.58% since the opening of trading at 9 a.m. Discover's stock price was at $202.13 Friday afternoon, up 0.74% since opening.

A Fortune Global 500 company, Capital One had $353.6 billion in deposits and $486.4 billion in total assets as of Sept. 30, 2024.

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